Are You Ready? 9 Steps You Need to Take 5-10 Years Before Retirement

Helen Hartman, CRPC®, PPC®

The years are flying by and retirement is approaching faster than one can imagine. Many people start saving for retirement in their early 20’s, they even start financial plans for preparation. However, you are no longer in your twenties, you are 5-10 years away from retirement. Do you know what you should be doing?

  1. First, picture yourself in retirement. What does that look like to you? Pay attention to the details you are envisioning. You want to paint your truest picture in order to prepare the best for what retirement means to you. Your ideas will help best estimate the activities and lifestyle you need to plan.
  2. Plan where you will reside. Will you be moving? Relocating? Live in a house? Condominium? Apartment? The decision of where you will reside has a large impact on your overall cost of living. If you are relocating, learn the cost of living in the new area ahead of time.
  3. Find out all retirement resources you have available and maximize all of them: Traditional IRA or Roth IRA, 401k, 403b, 457, etc.  Look into which accounts pertain to you, how much you are contributing, and if you’re able to contribute more. Learn what a catch-up contribution is and if you can make one.
  4. Organize your debt and establish a debt paydown strategy. There are various approaches to debt paydown. One approach may be paying off the account with the highest interest rate first and then the next highest, etc until debt is paid off. A second approach is to pay the lowest balance account off first, tackle the next lowest balance, and so on. Take this time to determine which is the best for you and implement it to eliminate debt before retirement.
  5. Look into your current accounts guaranteeing future retirement income. Find out what pension and/or social security you are set to receive. Project your future monthly desired income based on number one above. Subtract your guaranteed sources from your desired income calculate the difference. The difference is the monthly amount you must provide with your 401k, 403b and other forms of personal savings.
  6. Look into costs of future medical care and long- term care. Prepare accordingly. Medical and long-term care are frequently the largest portion of future expenses. With retirement 5-10 years away, this may be the time to research long term care options. Make sure you are aware of these major expenses and their impact on your net worth as you choose a retirement age. Planning for these needs require time.
  7. Familiarize yourself with a social security strategy. Social security provides many different options for distribution. The age of receiving these benefits has a tremendous impact on the complete retirement comfort. Determine which approach is best for you as there is no one answer for everyone.
  8. Do not put all your eggs in one basket. Make sure your entire portfolio is set up to work together. All accounts, no matter where they are held, must work together and should not all be invested in the same type of investment. Diversification is important. Make sure an investment professional is helping you to determine the level of diversification your portfolio provides.
  9. As you are now 5-10 years from retirement, now is a good time to research consolidation of accounts. It is easy to have 401k accounts left behind at previous employers or multiple IRA accounts. Look into good options for consolidating accounts and choose where you would like to house the accounts.

Retirement can be a major portion of our life. It is important to look into the many facets that need to work together for a comfortable living. The planning of this portion of life can require years of preparation. The gathering of information and development of savings schedules need to occur during the 5-10 years before your retirement date.

This article was written by Helen Hartman, Chartered Retirement Planning Counselor (CRPC®) and Professional Plan Consultant (PPC®).

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